Family Values

If you're like me -- and of course you are, you poor sap -- you've been wondering how the wealthy have been managing in the current economic climate. I bet you assumed that the poor dears have had their domestics and estates foreclosed upon, and are now huddling beneath very nicely appointed bridges outside Greenwich, Connecticut. Pretty close, bro-ham, pretty damned close. Here but for the grace of Leona Helmsley go you and me, podna:

IT turns out the other half — or at least the tiny slice who live at the top of the wealth pyramid — are not sleeping any better than the rest of America.

At a closed-door meeting of advisers to family offices — which serve families who typically are worth more than $500 million — I learned that the super-rich are just as concerned about the future as everyone else.

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Before you start laughing up your sleeve, be advised that this is not a good thing. When the super-rich get cold feet, the rest of America gets swine flu. They are, after all, the people who might finance new companies that create jobs, make big investments to support existing companies and spread their wealth throughout the economy.

According to a study the Family Office Exchange plans to release this month, the super-rich are most worried about what they do not know. Some 45 percent of the 108 ultrahigh-net-worth families surveyed in August ranked the economy and financial markets as their No. 1 concern. They were most concerned about government intervention in the financial markets and a commercial real estate bust.

Sooo....let's see, the implicit threat here is that if the eeevil gubmint gets some bright utilitarian idea to do the greatest amount of good for the greatest number of people, maybe help protect taxpayers from having to foot the bill from future financial malfeeance, they'll take their ball and go home. On the other hand, if a way can be found to further socialize the costs of leveraged tranches and wastrel descendants of wealth accumulators, that would be just about a dozen kinds of awesome.

In the past, family businesses and family wealth were commingled. If the business was struggling, the patriarch would often finance shortfalls. “Now the kids are upset about where the money is going,” said Holly Isdale, managing director at Bessemer. “Intrafamily dynamics are playing a bigger part in decisions.”

If the family put in place a strict estate plan, the children may legally own a good portion of what the patriarch made. And now they have choices to make that may go against his wishes. “These families have recognized that autopilot is not a good strategy,” said Amelia Renkert-Thomas, a lawyer with Withers Bergman.

The other risk to super-rich families is government action and increased regulation. They suspect it is coming but do not know how it will affect them. The result is that they are increasingly anxious about the future while still shell-shocked from the past year.

The article mentions this several times, but never elaborates on it. It's obvious why Wall Street predators don't want to be regulated, but why investors? Don't they want to be protected from being rolled by boutique bookmaking schemes and spreadsheet grifts?

Of course not, because the regulations wouldn't really protect them all that much. They would prevent them from getting the low-risk (since the gubmint foots the bill when it goes south) high-reward venture they all think they're entitled to. The gamblers and their bookies basically look at the other 95% of the country -- the world, for that matter -- the way Roman Polanski looks at a girl scout troop.

(Yeah yeah, cheap shot, don't get me started. And fuck the Hollywood assholes for their new Free Mumia petition. I don't think there's much utility in turning the world on its side to nab a 76-year-old creep who apparently has not repeated his transgression. But the guy got a seventh-grader drunk and high in a hot tub and buttfucked her on a couch. Just because he's a talented guy who got a seventh-grader drunk and high in a hot tub and buttfucked her on a couch doesn't buy him a pass, except in LaLa Land. Sheesh, must these tone-deaf idiots go out of their way to prove the Big Hollywood doofuses' points for them?)

Anyway. Back to the other clueless assholes.

One thing the group convened by Bessemer agreed on is that their clients were hesitant to buy commercial real estate. They fear that the value of it could collapse with greater ferocity than the housing market.

The logic behind this is that with everyone cutting back — companies laying off workers, consumers watching what they buy — there is less demand for office and retail space. If leases expire and are not renewed, building owners will have trouble making their loan payments. That, in turn, will affect the investors who bought the bonds secured by this debt.

Even those real estate owners who are doing well could be hurt. “A lot of this debt is short term and it needs to be refinanced, but there is no market for that,” Ms. Isdale said. Next year and 2011 are expected to be the worst, Ms. McCarthy said.

Yeah, just watch. This will be the next bailout, this commercial real estate collapse. It cannot be repeated often enough -- these people do not believe in the traditional risk/reward scenario sketched out by traditional capitalist economists, the basic Scottish Enlightenment principles invoked by Adam Smith, that work and product define the right and the utilitarian good for producers to retain control of their means of production.

But nothing's produced here, the reward only accrues to the bettor when the wager is won, and the costs are socialized when the wager is lost. And the implicit threat that these swells just won't invest and revamp the economy if they don't succeed, or if we don't intervene to keep them from failing, becomes less and less of a threat if they're pulling their money out and hoarding it anyway.

The bailout would have worked -- and by worked, I mean jumpstarted the economy so a sufficient amount of consumers and business could be re-engaged in it in a relatively short period of time -- just by giving every household a low five-figure check, say $10-20K. Some people would have pissed it away sure, put it up their noses or bought sacks of magic beans. But most rational people would have saved some, paid down some debt, and/or bought toys, all of which would have rejuvenated the most impacted economic sectors and helped lower the perilous national debt-to-income ratio.

Hell, some of us might have even made sure to donate to politicians, so that we might have a seat at the table, and actually have an opportunity to participate in the decisions that affect our lives. That would have been something. Instead we're supposed to give a shit because old-money douchebags are taking a hit in the trust fund. This let-'em-eat-cake schtick is getting old real fast.